Petco Park's broken promise

The results of a recent economic study on Petco Park at its 10th anniversary could be put in baseball terms. The East Village-based ball park? It's one for three.

As hoped, the ballpark did indeed bring substantial residential development to downtown, according to a report by the National University System Institute for Policy Research. From 2004 to 2012, downtown added 14,700 new units.

That's the hit, clearly, the report says.

“Petco Park's opening was instrumental in helping accelerate Downtown's development as a residential community,” it asserts.

But when it came to the other at-bats …

No, the ballpark has not created a wealth of new jobs. Only 29 more workers were employed in downtown in 2011 compared to 2004 — from 64,718 to 64,689.

Yes, 29. (That's going down swinging … At a pitch in the dirt, no less.)

And attendance continues to dwindle, falling from a high of 3 million in Petco's opening year in 2004 to just above 2.1 million last year. That's about how many fans were attending games when the Padres played at Qualcomm Stadium.

Clearly, that's an out, too. A weak pop-up to second. Losing a million fans means losing a million wallets.

National University's report and the park's anniversary have once again opened the debate regarding the park's impact. It's also fueling debate regarding the merits of a new Chargers' stadium, which is being proposed for downtown.

Yes, we've been down this road before. And little wonder, considering how much the city invested in the project. It put up $301 million of the $474 total cost.

Lets’ take a closer look at what residents got for their $301 million.

Jobs created — 29 or 19,000?

Jobs were a key selling point for the Petco Park. When Proposition C — the voter initiative for the ballpark — was being debated, boosters claimed the ballpark would create 17,000 jobs.

“There were quite a few promises made,” said Erik Bruvold, president of National University’s policy research group and author of the study. “Obviously, when it comes to job creation, that hasn't occurred.”

What's interesting is the rather striking differences between Bruvold's report and one in 2010 that was much more glowing. The report, done by Dallas-based Convention, Sports and Leisure and commissioned by the San Diego Regional Economic Development Corp., concluded that 19,220 jobs were created, with payrolls north of $783 million.

So which is it?

Twenty-nine? Or 19,000-plus.

Bruvold got his numbers from the U.S. Bureau of Labor Statistics. But there is a rub, he explained. Some jobs have left downtown during those years. And Petco supplanted some of those losses, but they weren't many.

To figure this out, one needs to understand how job creation works. You can't base it on the local dollars being spent at the ballpark. That's because that money would have been spent elsewhere on entertainment, Bruvold said. It's called the “substitution effect.” People only have a set amount of money they spend on leisure. If there were no ballpark, people might go to a movie or a restaurant, instead. And job creation would result in those leisure areas instead. There would not be a net gain of jobs.

So the dollar amount you look for is what out-of-town folks who went to the ballpark spent, he said. That's because that's new money that wouldn't have come here if not for the new park. And that amount in 2013 was $44.3 million, which equates to the creation of about 791 year-round, full-time jobs.

Still a far cry from 19,000 …

Convention, Sports and Leisure could not be reached for comment to explain its methodology.

The 2010 report did have its critics, including Vladimir Kogan, co-author of “Paradise Plundered: Fiscal Crisis and Governance Failure in San Diego,” who told the U-T San Diego at the time: "This report is largely useless because it combines the economic impact of the ballpark with the convention center expansion that took place over the same period."

Does residential development justify $300 million in public funds?

Supporters have maintained that Petco Park is an unqualified success because of the development that sprouted around the park, which had been a blighted neighborhood full of aging warehouses. Proponents, at the time of the ballot initiative, called it “more than a ball park,” because of the requirement that the Padres had to secure at least $300 million in private investment to revitalize the entire district.

Under the agreement, JMI Realty, the real estate company owned by then-Padres owner John Moores, was responsible for developing new office parks, retail centers, public open space and affordable housing in the twenty-six-block district.

In effect, the city agreed to fund a majority of the stadium in return for the Padres agreeing to revitalize the area around the stadium. More than $3 billion in private money was eventually invested in the district. But not in the way city leaders had hoped for, or been led to believe.

Moores minimized the office parks and retail centers, which had promised new sales tax revenue for the city. He shrunk the size of the “park at the park” from four to less than two acres and planned no other open space. And he changed plans at the last minute and moved the affordable housing units off site.

Instead, JMI Realty focused on residential buildings. The modest six-story buildings that voters had seen in renderings at the time of the ballot initiative, were expanded into 20-story condos. Ten years later, more than 14,000 residential units have been added, with more on the way.

Sempra Energy — one of San Diego's only two Fortune 500-based companies — is building a new headquarters. The San Diego Central Library opened last year. And JMI Realty received approval in February for a 37-story residential tower directly across the street from Petco Park. It plans to add 688 housing units and more than 55,000 square feet of retail space to the area.

Without question, redevelopment has significantly increased property values, which in turn has generated more tax revenue. But much of the increase in taxes did not go into the City of San Diego’s general fund, according to “Paradise Plundered,” the book by Kogan, along with Steven Erie and Scott Mackenzie, which gives an account of the East Village redevelopment.

“There is strong evidence that the bulk of the benefits from East Village revitalization have been captured by private developers, whereas many of the costs have been borne by San Diego residents,” the book states.

Critics also point out that the revitalization started with the expansion of the convention center, and may have continued without the ballpark.

“Very few of the condos were built because of the ballpark,” Mike Aguirre, the former city attorney, told the San Diego Reader in 2010.

Critics also say the ballpark has failed to transform the East Village into a vibrant community. A number of storefronts remain empty. Last year, Our City San Diego profiled one business — Wine Steals — that left the ballpark village because there wasn't enough business.

“It's an expensive location and not enough people were coming through the door,” owner Ken Mills said.

Where is the Padres team we were promised?

One of the problems with the new ballpark — particularly when it comes to bringing people downtown — has been the Padres on-field performance.

“Clearly, if the Padres were winning, that would help,” Bruvold said.

Last year, the team averaged 26,749 fans per game. The Los Angeles Dodgers, which led the league in attendance, had 46,216 fans per game.

It was hoped that the Padres would play better at the new digs. Fans had hoped — and they were encouraged to believe so by ownership — that the new ballpark would increase revenue and allow ownership to field a more competitive team.

But the move to Petco has not gone as scripted. The first fallout was the divorce between Moores and his wife, Becky. The financial impact seemed to be apparent. He cut payroll.

His first effort to sell the team was unsuccessful, which caused even more uncertainty and floundering. It wasn't until 2012 that the team was finally sold to a group headed by local businessman Ron Fowler.

In that time, the Padres traded top players such as Jake Peavey and Adrian Gonzalez and replaced them with lesser talents. The results? The Padres have finished in last or next-to-last in the National League West in every season except one dating back to 2008.

Petco Park has also been a pitcher’s paradise — meaning few offensive sparks. Through its first nine years, it averaged 26th place out of 30 ballparks for home runs. The team moved the fences in last year, and that helped it jump to 17th place for home runs. Home runs improved from 1.3 per game to 1.8 per game. But runs are still scarce, ranking the ballpark dead last in 2013.

Bruvold said losing seasons are a part of baseball. Even the best-managed teams don't always win. So the challenge is to create a ballpark experience that's so vibrant people want to come regardless of the Padres performances, he said. He doesn't think that's happened, judging by the drop-off in attendance.

“Right now, it's not a compelling experience,” he said.

He points to the San Francisco Giants who play at AT&T Park. It opened in 2000 and the Giants have topped 3 million fans every year except one. Yes, they have won two World Series in that timeframe, but they've also finished in last once and fourth twice. The year they finished last? That was 2007 and they still drew 3.2 million fans.

Why?

“Because AT&T is a spectacular experience,” he said.

One of the reasons why it might be such a spectacular experience is that the ballpark was built with private money, putting pressure on team ownership to make it special, he said.

“They're on the hook,” he said.

The Padres could use some ‘wow.’ With attendance at 2.1 million last year, it is about the same level as when the team played at Qualcomm Stadium.

What does the Petco Park experience tell us about a future Charger’s stadium?

The Petco Park experience could help the city when it comes to negotiating with the Chargers in their stadium quest, Bruvold said. For one thing, it could highlight some of the more important questions the city should ask.

As the Padres did, the Chargers are saying that a new stadium downtown could be a unique and powerful civic asset.

“One of the real attractions to downtown is the ability to create a sports and entertainment district that would really be unrivaled in this country,” Chargers Special Counsel Mark Fabiani recently told the Mighty 1090 radio station. “I mean, you look at Staples Center in Los Angeles and L.A. Live, and what they’ve been able to do just with one arena there, creating a real vibrant part of downtown.”

As was the case with the Padres, the Chargers have said they need a new stadium to remain competitive. But there's no guarantee of that, as the Padres have shown. The Padres have their new stadium, but attendance and performance on the field mirror what they were at Qualcomm.

Stadium backers also point to the economic benefits of Super Bowls. San Diego has hosted three of them, but the NFL has made it clear that the city will not get any more Super Bowls unless a new stadium is built.

The NFL claims the economic impact of a Super Bowl is significant and helps offset new stadium costs. In 2003, a study done by the NFL and San Diego Super Bowl Host Committee said the economic benefit to San Diego County was $367 million. But more recent studies have shown the benefit to be considerably less.

A study of Super Bowls held from 1970 through 2001, by economists Robert Baade and Victor Matheson, found that the economic benefit was around $30 million for the host cities.

For one thing, Super Bowl-goers force other visitors to ignore the host city, so the overall impact is marginalized. Also, many visitors are from around the region, so the substitution factor comes into play. Plus, it's costly for governments to host Super Bowls. Police expenses rise, for instance.

Baade told The New York Times that he figured this year's Super Bowl would have a $55 million impact to the region's economy.

When the Padres were pushing for a new ballpark, they made a number of assertions that have not panned out. To help sell the argument for the new park, the Padres hired the research firm of Deloitte and Touche to do an economic impact study, according to a report, Welcome to Petco Park: Home of Your Enron-By-the-Sea Padres, by Mark Hitchcock.

The firm predicted that “the Ballpark and its surrounding development should generate about $588.5 million” per year in expenditures, support 5,268 jobs, and generate $12.9 million per year in tax revenue.”

However, as Hitchcock notes, it did not factor in the substitution effect when doing the study.

“In the extremely optimistic report that Deloitte and Touche prepared to justify the use of public funds for a new ballpark for the Padres, there is a one sentence note buried in the report: 'The substitution effect is difficult to accurately quantify and has not been included in this analysis,’ he wrote. “Essentially then, the economic impact report used by the Padres to lobby the San Diego citizens and the public for public funds was admittedly misleading.”

A number of economic studies actually show that ballparks don't create all that much economic benefit and can even be a drain on a city's finances.

Interesting, a new stadium project being floated by the Tampa Bay Rays is steering away from the economic-benefits argument because of the number of studies that have debunked such gains. Instead, it's focusing on the redevelopment hopes on the land where the current ballpark, Tropicana Field, sits.

“The Rays' approach is notable for a couple of reasons,” according to an article in the Tampa Tribune. “The Rays appear to be acknowledging what a growing number of economists — and voters — are concluding: The days of viewing sports stadiums as economic revitalization machines may be coming to an end.”